LQG 2023/10/18 – 18:30 – Optimal Portfolio Choice with Absorbing State Markov Chains – Andrew Ang – at Snowflake – Hybrid

Optimal Portfolio Choice With Absorbing State Markov Chains

Alternative title:  Investing in Uninvestable Markets

Seminar by Andrew Ang

2023/10/18 – In-Person and On-Line – Hybrid!

The LQG is very grateful to Snowflake – for hosting this in-person and on-line hybrid LQG.

In this seminar Andrew Ang will discuss a model of optimal asset allocation with a market that has the potential to decouple. There are three Markov regimes: a regime where the market remains fully investable, a second regime where the market may potentially decouple, and a third regime where the market becomes decoupled and investors lose all capital. The regimes are persistent, which induces time-varying hedging demands for an investor rebalancing regularly. The investor wishes to hold the potentially decoupled market as it can provide a source of returns that can be partially liquidated to provide intermediate consumption. With the framework, we compute certainty equivalents of foregoing investment in the potentially decoupling market and investigate a range of comparative statics including varying the probability of decoupling.


Andrew Ang

Managing Director – BlackRock – Head of Factors, Sustainable and Solutions (FS-Squared)

Andrew Ang, PhD, Managing Director, is Head of Factors, Sustainable and Solutions (FS-Squared). He also serves as Senior Advisor to BlackRock Retirement Solutions. As part of BlackRock Systematic, FS-squared is responsible for proprietary factor investing, delivering cutting-edge sustainable alpha, ESG outcomes and product innovation.
Dr. Ang is a well-known financial economist specializing in quantitative investing. Author of over 100 publications, Dr. Ang has published on sustainable investing, equities, fixed income, optimal asset allocation, and alternative assets. His seminal papers include research in the minimum volatility factor, incorporating macro factors into bond pricing models and factor allocation. His book, Asset Management: A Systematic Approach to Factor Investing, has been translated into Chinese Japanese, Korean and Spanish. His recent research focuses on generating alpha with ESG data and net zero multi-asset investing.
Dr. Ang has been granted patents, and he has won several industry prizes and grants, including the Harry Markowitz award, the Bernstein Fabozzi/Jacobs Levy award, and prizes and grants from the Q Group, INQUIRE, Netspar, and the National Science Foundation. According to RePEc/IDEAS, the largest bibliographic database in the field of economics, Dr. Ang is rated in the top 0.1% of world-wide economists by citations, downloads, and views.
Before joining BlackRock, Dr. Ang was the Ann F. Kaplan Professor of Business at Columbia Business School. He was previously Chair of the Finance and Economics Division and a Faculty Research Fellow of the National Bureau of Economic Research. As a professor, Dr. Ang worked with several large institutional managers as an advisor. His work with industry was recognized by aiCIO naming him one of the top 10 most influential academics in the institutional investing world.
Dr. Ang earned a BEc(Hons) from Macquarie University, and a PhD in finance and MS in statistics from Stanford University. Dr. Ang used to be a Fellow of the Institute of Actuaries of Australia.